How to Make Profits and Stop Losses in Cryptocurrency Trading?

Cryptocurrency trading can be an exciting and potentially profitable venture, but it also comes with unstable risks. While “how to profit properly with cryptocurrencies” is what most investors are looking for, it is important to note that stop losses need to be taken when the market fluctuates during the investing process.

How to Profit from Cryptocurrency?

This is the main goal of any investor, which can be said to make their investments profitable. However, we will not discuss routine investment methods such as buying low and selling high, leveraged investments, and perpetual contracts. Instead, other ways of making a profit are considered.

Periodic Investment Plan

The Periodic Investment Plan is an investment method that features the periodic purchase of coins with a fixed amount of money and a fixed proportion for each currency in a portfolio. The strategy of purchasing at different times could lower the risk of high prices compared with the one-off method, and a fixed amount of money helps to average the cost. Favorable investing strategies make it easier for investors to reach their investment goals.

As a widely used investment method, periodic investment is convenient for novice investors and normal cryptocurrency enthusiasts to use and to decide the best time to invest. For senior and professional investors, this method provides an alternative for them to store up coins and reduce investment risks. 

This investment method is the best way to invest in the current bull trend. The Gate.io cryptocurrency exchange is also the choice of many investors, with 1400+ cryptocurrency price updates and various investment options, including the Periodic Investment Plan. Gate.io’s Periodic Investment Plan features a one-click investment, a flexible portfolio, and is redeemable and changeable anytime, which can be considered as veritable “couch-potato investing” and a useful tool to make investments in a fluctuating market.

What is Crypto Trading Stop-Loss?

When the price falls to a certain level, a stop-loss order is placed to sell the cryptocurrency. This helps to minimize potential losses to investors if the price of the token continues to fall. The idea behind a stop-loss is to set a predetermined price at which the crypto asset will automatically be sold to limit potential losses. For example, if an investor trades BTC/USDT for $50,000 on the Gate.io cryptocurrency exchange and sets a stop-loss at $45,000, the investor’s bitcoin will automatically be sold when the price drops to $45,000.

In both cases, the order will only be executed when the investment price reaches the specified range. In short, a stop-loss strategy is used to avoid further losses by automatically exiting a trade at a threshold point when the market is not favorable to a trading decision. This is a good option and is a personal choice for day traders to use and avoid losses after a price fall.

Types of Stop-Loss Orders

Regular Stop Orders: A regular stop order is a basic type of stop loss that triggers a sell order when the price reaches a certain level.

Trailing Stop Order: A trailing stop order adjusts the stop level as the price moves in the trader’s favor. The stop level is set at a certain percentage or dollar amount below the market price.

Breakeven Stop-Loss Order: A break-even stop-loss order is set at the level of a profitable trade and is designed to lock in profits and prevent potential price declines.

Time-based Stop-loss Order: A time-based stop-loss order is set to trigger after a specified period of time, regardless of the price level.

Benefits of Using Cryptocurrency Stop-Losses

Risk management: Stop-loss orders allow investors to set maximum loss limits, which helps investors manage overall risk. The impact of negative price movements on an investor’s trading portfolio is reduced by controlling losses.

Emotional control: Cryptocurrency trading can be an emotional experience, especially during periods of high volatility. Stop orders remove the emotion from trading by automatically executing the sale process at a predetermined price.

Capital preservation: By setting a stop loss, investors can avoid selling at panic-driven lows, which can help preserve capital. Stop orders automatically sell cryptocurrencies when prices reach a certain level, ensuring investors do not suffer significant losses.

Saves time: Monitoring market transactions around the clock can be very time-consuming, especially if an investor has multiple open investments. A stop-loss order allows you to set up sell conditions in advance so that you can focus your time and energy on other things.

More focus: With a stop-loss order, investors can focus on the strategy and overall market trend rather than always worrying about the price of their cryptocurrency holdings.

Increased flexibility: Stop orders can be adjusted or canceled at any time, giving you the flexibility to adapt to changing market conditions. This can be particularly useful if you need to adjust your trading strategy.

Peace of mind: Having a stop loss in place gives investors peace of mind knowing that losses are limited and that investments are protected in the event of a sudden market downturn.

Cryptocurrency Stop-Loss Limits

Slippage: The cryptocurrency market can be highly volatile, causing stop orders to be filled at prices different from the specified stop level, resulting in additional losses.

Market Gap: The cryptocurrency market may experience sudden and large price movements, resulting in stop orders being triggered at a worse price than expected due to market gaps.

Lack of flexibility: Stop orders lack flexibility and do not take into account market conditions or other changing factors, resulting in missed opportunities or prematurely closing positions.

Re-entry points: Stop orders may not take into account an investor’s desired re-entry point, resulting in a missed opportunity to re-enter the investment at a more favorable price.

Conclusion

The smart use of cryptocurrencies for profitable investment in cryptocurrency trading and the timely use of stop-loss methods can be valuable tools for managing risk and maximizing profits. It allows traders to set pre-determined loss limits and reduce the impact of market volatility on their portfolios. However, it is important to approach stop-loss strategies with caution and to thoroughly understand the mechanics of how they work before applying them to an investor’s trading strategy. With the right approach, you can make informed trading decisions and increase your chances of success in the cryptocurrency market.